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2008 Tax Rebate Stimulus Package Explained

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Money Money Money1/15: The Committee on Appropriations just released the an executive summery of the details of the American Recovery and Reinvestment Plan.

This post refers to the first economic stimulus package of 2008. You can read about the second stimulus package here.

Looks like the stimulus payments will be sent out ahead of schedule, with the 800,000 direct deposit payments on Monday April 28th, Tuesday, Wednesday, and a whopping 5 million on Friday (none on Thursday). The schedule of payments will follow the original schedule, just accelerated by a week.

No doubt you’ve heard the “great” news that a deal on a stimulus package has been reached and that checks will be in the mail as early as May. Whether you believe the naysayers that say we’re really just propping up the Chinese economy (or oil rich nations) because we’re borrowing from them to buy their goods or whether you believe the proponents that say this will boost own economy in magical ways the fact of the matter is a deal has been reached – so what is it? Essentially, it’s a removal of the 10% tax bracket for everyone with some modifications. It includes phaseouts that begin past annual incomes of $75,000 and a component that includes those working Americans that don’t earn enough to pay income taxes.

To get a clearer understanding of the rules, let’s walk up the income levels and explain how it works; beginning first with those filing their taxes as singles and then adding in families. How the phaseouts work, from what I can understand, is that you first determine eligibility (if you earned more than $3,000 and paid taxes) and then, if you fall in to the phaseout, start reducing your benefit.

Singles

Determine Eligibility:
If you earned less than $3,000 – unfortunately you’d get nothing.
If you earned more than $3,000 but paid no taxes, you’d get $300.
If you earned more than $3,000 and paid taxes, you get $600.
If you have children, add $300 per.
Determine Phaseout Reduction:
The phaseout levels begin at $75k and end at $87k, at a reduction of 5% per $1,000 over the lower limit. If you earn above $87k, you’re over and thus get nothing regardless of the math.

Couples

Determine Eligibility (appears to be the same as singles):
If you earned less than $3,000 – unfortunately you’d get nothing.
If you earned more than $3,000 but paid no taxes, you’d get $600.
If you earned more than $3,000 and paid taxes, you get $1,200.
If you have children, add $300 per.
Determine Phaseout Reduction:
The phaseout levels begin at $150k and end at $174, at a reduction of 5% per $1,000 over the lower limit. If you earned above $174k, you’re over and thus get nothing regardless of the math.

Some Common Examples

These are taken from a post by Gridking on Tickerform.org:

  • An individual with $2,500 in earned income in 2007: Disqualified because income fell below the $3,000 threshold. No rebate.
  • A married couple with no children, with adjusted gross income of $100,000 in 2007: Would qualify for the full $1,200 couples. A $1,200 rebate.
  • A worker with one child, who earned $9,000 and owed no taxes in 2007: Would qualify for the $300 rebate available to individuals who pay no taxes but earned at least $3,000, plus an additional $300 for the child. A $600 rebate.
  • A couple with income of $145,000 in 2007, with three children: Would qualify for the full $1,200 for couples, plus $300 for each child. A $2,100 rebate.
  • A couple with income of $160,000 in 2007 with two children: Would qualify for a partial rebate, reduced by 5 percent for every $1,000 in income above the $150,000 threshold. An $1,800 rebate $1,200 for the couple plus $300 per child — would go down by 50 percent for this family. A $900 rebate.
  • A couple with income of $200,000 and four children: Disqualified because their income exceeded $174,000, the phase-out limit. No rebate.

There were a few other salient details to the bill, including a temporary raising of the individual mortgage ceiling that Fannie Mae and Freddie Mac could purchase (FHA loan limits) – increasing it to a whopping $729,750 (up from $417,000), and business tax breaks for infrastructure investments.

Some Questions & Answers

Here are the answers to many of the questions in the comments below, I wanted to wait until the Senate and House agreed on something before trying to tackle these:

Is this a rebate? What is it a rebate on?

The funds are NOT a rebate on the taxes you will pay next year, they are based on your 2007 tax return. Next year, after you file your taxes, the IRS will calculate what you should’ve gotten and adjust your return. So if you received too much “rebate,” they let you keep it. If you received too little, they decrease what you owe next year. (Correction made, Thanks Phil!)

How do I know what I get?

What you receive in May (or June or July) will be based on the tax return that is due April 15th. It will then be adjusted next year if necessary. So, it is based on your 2007 return, use the math I outlined above or the calculator below to determine what you’ll be getting.

Tax Rebate Calculator

This is a calculator that you can find on Consumerism Commentary and has been vetted by tax professionals, this is NOT tax advice so please consult a professional if you have additional questions:

(Photo: Tracy O)

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734 Responses to “2008 Tax Rebate Stimulus Package Explained”

  1. simple pig farmer says:

    Congrats to you Tommy… and F-you Dan.

    I’m with you T-man. I’m from a comfortable upbringing, but this is only because my mom worked 2 jobs since I was 10 to raise me and my 2 siblings. My dad died when I was 10 so my mom did what she needed to do… and we got by. Now, 25 (or so!) years later I’m making well into 100K a year with no college, just hard ass work and I’ll be damned if someone is going to take my nice watch! Go get a job, have a work ethic, and decide what is important to you in life.

    Good luck, my brotha I know you’ll make it!!

  2. olie says:

    olie 08/04/08
    I’m a US citizen, born in Calif. 1924 & moved Canada in 1972 as a landed immigrant. I get my social security from the states & also an old age pension from Canada.
    The SS made me sell my company & stock & send proof from the high courts, it took two years to get cleared. The only thing I could own was my home. I went to three banks in the states & asked them to help me to make my business more profitable. They turned me down because I did’nt have a big debt & no credit rating. I told the banks to put there money where the sun does’nt shine & moved to Canada.
    I gave the states three years of my life in the south pacific war, so I,m trying get a little back in Bush’s Stimulus passage.

  3. Jeffery Collins says:

    My Understanding Is that this rebate ; Is to stimulate the economy and get America back on it’s feet ! I guess I’m not worthy to recieve this stimulous rebate: because I was injured on the job and am collecting Labor & Industries Insurance. I’ve paid Taxes most My life ,till injured on the job !Most everybody Is eligable except The Injured Worker. I pay Child Support and have a Child & Wife at home. I only recieve 60% of what I normally make on the job.Now I have to get retrained and start out at entry level.What’s realy going on in America !They even treat you like your on public assistance when injured on the job.Sincerely Jeffery :The unworthy!!!!!!!!!!

  4. toasty aroma says:

    this whole rebate thing is so ridiculous. Why does the government think that every economic crisis can be solved by shopping?

    write in Ron Paul, abolish the Fed (the root of all the problems), reduce spending, restore the republic.

  5. toasty aroma says:

    oh, by the way, I’m buying gold with my $600. lol.
    up yours Bernanke, at least i’ll have some gold when the dollar slips past the peso.

  6. Carleric says:

    Look, I’m pretty much an idiot. Help a brother out, please. Let’s say I get an economic stimulus check for $600. When I go to pay my taxes next year (2009), will my refund be $600 less? Essentially what I’m asking is, is this check coming out of next year’s refund? (Sorry if this is too basic a question, or if it’s been asked here before.)

  7. elle says:

    Updated March 7, 2008
    by msnbc

    “The notices are going out this month to an estimated 130 million households who filed returns for the 2006 tax year, at a cost $41.8 million, IRS spokesman John Lipold confirmed.That works out to about 32 cents to print, process and mail each letter. It doesn’t include the tab for another round of mailings planned for those who didn’t file tax returns last year but may still qualify for a rebate.”

    The actual rebate checks are scheduled to go out starting in May, after the IRS has finished separately mailing out routine refunds for the 2007 tax year.
    The letters will be a reminder that people need to file a 2007 tax return so they will receive the rebate if they are eligible for it.

    SO PEOPLE WHO DID NOT HAVE ANY INCOME FOR 2006 AND DIDNT FILE TAX FOR 2007 TAX RETURN WILL NOT GET ANYTHING.IS THIS WHY WE DIDNT GET ANY LETTER?

  8. Vince says:

    I have moved recently will my stimulas check be fowarded?

  9. Sherry says:

    I carry my mother on my income tax. Is there a rebate for her?

  10. BRYANNA says:

    HERES THE THING. THIS IS AN ECONOMIC STIMULUS PACKAGE. THE RICH DONT NEED ANYMORE MONEY. IF YOU CAN AFFORD TO PAY YOUR BILLS AND DRIVE A DECENT CAR AND LIVE IN A NICE HOUSE PLUS HAVE SOME MONEY TO BURN THEN WHY DO YOU CARE ABOUT A FEW HUNDRED DOLLARS. AND THE RICH ARENT BEING PENELIZED BY THE GOVERNTMENT BY NOT GETTING THIS CHECK. ITS TO HELP PEOPLE WHO NEED THE MONEY. THATS WHY THEY ARE GIVING IT TO THE LOWER TAX BRACKET. TRUE IT WONT HELP MUCH IN THE LONG RUN BUT THE GOVERNTMENT CANT JUST HAND OUT FREE MONEY ALL THE TIME AND IF WE WANT A GOVERNMENT WE HAVE TO PAY SOME KIND OF TAXES. AND IT SHOULDNT BE FOR JUST PEOPLE WHO PAY TAXES. THAT IS WHAT A TAX RETURN IS FOR. THAT ISNT WHAT THIS IS. NOT ALL POOR PEOPLE ARE DEADBEATS. AND EVERYONE MAKES MISTAKES AND LIVE WITH THEM EVERYDAY. THIS IS A STIMULUS PACKAGE. IT IS TO STIMULATE THE ECONOMY. NOT GIVE RICH MONEY TO PUT BACK AND SAVE. AND TO THE PEOPLE WHO ARE IN COLLEGE LIVING AT HOME…WHY DO YOU NEED THE 300 OR 600 DOLLARS. YOU LIVE AT HOME!!! AND AS FAR AS THE CONFUSION ABOUT FILING MARRIED OR SEPARATELY AND HOW MUCH YOU GET. ITS NOT HARD TO UNDERSTAND…NOONE GETS MORE THAN 600 DOLLARS PER PERSON. 600X2=1200. THATS HOW U FIGURE IT OUT. IF THERE IS ONLY ONE OF U THEN U GET 600 DOLLARS. IT BOILS DOWN TO THIS; IF U TRULY NEED THE MONEY AND THE HEPL THEN YOU DESERVE IT. IF YOU ARE DOING FINE IN LIFE YOU DONT NEED THE MONEY SO YOU CAN HAVE MORE THINGS THAT YOU COULD LIVE WITHOUT…WETHER YOU PAY TAXES OR NOT.

  11. Alan says:

    Let’s remember what the package is supposed to do; stimulate the economy. Whether or not it’s fair, giving $1200 to a person that makes $150,000 a year won’t help the economy, it will just pile on top of their other money and then instead of having $40,000,000 they will have, $40,001,200. I just use that amount as an example, but my point is, that is a tiny amount of money to anyone above the cap and it really won’t affect their spending like it would for someone who has very little. The people above the cap don’t NEED the money. That’s really what this is about. Yes, I personally know people that struggle to pay bills and yet always have fake nails and Starbucks every morning, but I would hope that this kind of loser is the exception, no the rule. I haven’t seen an answer yet as to how it works for non-custodial parents that claim children on their 2008 taxes. Should the money go to the parent that claims the kids or the one they live with?

  12. Disgusted says:

    I’m really surprised that Bush doesn’t call it a “stimlious” package, you know, along the lines of “nuclear” versus “nucular”. What a tool!

  13. Nicholas says:

    My only income comes from the sale of stocks. Do I qualify for the tax rebate?

  14. robert reinkemeyer says:

    i think thats the stupidest shit ever. what about the people like me who made 2,900$ last year. screw those people right. now i have to watch everybody around me get 600$ for nothing. while i still have nothing

  15. Anonymous says:

    what if your eighteen and make over 3000, and in high school. do i get any money????

  16. ricky says:

    im on ssi and have 2 children ??? do i get a refund

  17. IF you filed a return for 2007 you are SUPPOSED TO be eligible for the ‘stimulis package’. But you have to have filed.
    I was denied the child credit of $1000.00 on my federal return as my daughter turned 17 in November and I will most likely be denied $300.00 more in this ‘stimulis package’ for the same reason. And she is in 11th grade.

    I heard some static that this is an “advanced rebate payment” for 2008 taxes paid this year and when filing the 2008 return it will be deducted from any refund due.
    If due a $1500.00 refund, subtract $1200.00 rebate, get $300.00 refund.
    But if due a $1000.00 refund, got $1200.00 rebate, no refund-no repay.

    As I said before, Republican Voodoo Economics.
    And the national deficit climbs another trillion dollars.

  18. alan says:

    i am retired receive s.s. disability did work 34 years .
    i received the rebate app. in the mail . my wife and i can get 1.200.
    but thinking it over for a week i decided to throw it in the trash.
    the reason being i do not trust george w. bush .and because of him i no longer have faith in the goverment.i am positve i did the right thing.
    actually proud of myself for not kissing bush’s …a–

  19. elena says:

    if u file a extension, do u still qualify for the check? our home recently burned????????????

  20. Jay says:

    Contrary to what people are saying, the rebate is NOT a “prebate” nor is it taxable income. This will not decrease your rebate in 2008, nor will it mean you have to pay more taxes. This is explicitly outlined on the IRS FAQ page for the stimulus rebate. Don’t buy all this other crap. These people don’t know what they’re talking about.

  21. Sonia says:

    I am on SSI and am a single mother of one. Can I file for the tax rebate?

  22. jed says:

    I have a stupid question. We have to pay in to the government this year, so they will just keep that money and put it towards what we owe, right? Surely they would not give me a check so I can write one back. Either way works for me, I just need to know if I should write a big check now or just hang back.

  23. shiyam says:

    Is a 1040NR-EZ tax filer is eligible for this rebate????

  24. Tiffany D says:

    I filed using direct deposit for 2007. However, I have closed that account since then. What will happen if there is an attempt to deposit into a closed bank account?

  25. Jessica says:

    I am a full time college student who made more than $3,000 in 2007 and filed a tax return. I was clamed on my parents as a dependant but am 18. Will i get a rebate or will my parents get it or neither.


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